Blog Post by: Benjamin Landy, on December 4, 2012
Corporate profits in the United States rose to new heights last quarter, according to a report last week from the Bureau of Economic Analysis. Profits from current production (which takes into account inventory valuation and capital consumption adjustments) grew $67.3 billion, to a record $1.99 trillion.
The profit growth was driven entirely by robust business activity within the United States, as the recession in Europe and economic slowdown in China continued to weigh on foreign profits. But every dollar of domestic growth belonged to the financial sector, which increased profits $71.3 billion. Nonfinancial corporate profits actually dropped by $1 billion.
Employee compensation, meanwhile, continued to shrink as a share of the economy, falling to 43.5 percent of GDP, from a high of 54.6 percent in 1970. Much of that decline was replaced by corporate profits, which doubled as a percentage of GDP over the same period and accounted for nearly 10 cents out of every dollar of economic output last quarter.
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